India’s hospital sector is an attractive destination for foreign direct investment (FDI). Recent investor interest has been driven by a number of cumulative factors. These include increased consumer demand for quality healthcare, strong governmental support, with the 2025 budget allocating INR959.58 trillion (USD10.88 billion) for healthcare, and the growth of medical tourism through the Heal in India initiative. The country benefits from well-trained medical professionals, increasing consumer wealth and attention to health, progressive digital health initiatives under the Ayushman Bharat health assurance scheme and increased health insurance penetration.
Anand Jayachandran
Partner
Cyril Amarchand Mangaldas
There have been several recent large FDI acquisitions of hospital groups. Control deals are becoming increasingly common and the sector witnessed significant capital inflows of USD1.5 billion in the 2024 financial year. Notable transactions include Blackstone’s acquisition of Quality Care, its takeover of KIMS Hospitals, the proposed merger of Aster and Quality Care, OTPP and Manipal Hospitals’ acquisitions of Sahyadri Hospitals, Temasek’s investment in Manipal Hospitals, KKR’s acquisitions of Baby Memorial and HCG, IHH’s investments in Fortis and Gleneagles and BPEA’s investment in Indira IVF. These private equity-backed transactions have been accompanied by a parallel wave of bolt-on acquisitions by hospital groups.
India’s exchange control rules permit 100% FDI in hospitals under the automatic route. However, it must be kept in mind that hospitals are heavily regulated and investors should identify possible sources of liability when they evaluate investments. There are some areas about which investors should be careful when they are considering injecting resources into the medical sector.
Particular attention should be paid to older assets. Government agencies prosecute management and directors for safety incidents. Compliance with fire safety standards, building codes and zoning requirements is essential.
Aditya Prasad
Partner
Cyril Amarchand Mangaldas
A number of Indian hospitals vest assets in trust structures or hold properties for charitable purposes. Although investors previously refused to acquire such assets, market practices for these structures have evolved. Mechanisms have now developed to ensure that these assets are investable and adhere to applicable standards. Incentives, referrals and rewards within hospitals are another important focus area and potential sources of liability. Ensuring that these structures conform to appropriate codes of conduct is critical. Real-world experience is that practical and compliant structures can be constructed in this area.
Checks must be made regarding the status and sufficiency of operational licences, including medical and drug permission and state-specific licences to operate and manage healthcare facilities. Where hospitals have on-site pharmacies, enquiry should be made to ensure they do not run multi-brand retail activities for which FDI requires governmental approval. If hospitals conduct clinical trials, investors should satisfy themselves that no serious adverse events have arisen from them and that there exist no associated liability problems.
Although successful investment in India’s hospital sector requires careful navigation of the country’s complex regulatory landscape, there is emerging evidence that those injecting FDI into this market are achieving substantial success at scale. The large number of significant transactions by sophisticated and quality investors demonstrates that, with due diligence and expert guidance, regulatory challenges are entirely manageable.
Foreign investors who conduct comprehensive due diligence covering licensing requirements, health and safety compliance, asset verification and potential retail restrictions can achieve successful investment and growth. The market has matured significantly, with established best practices and compliant structures now readily accessible to deal with complex areas.
India’s hospital sector is one of the most compelling investment opportunities in the global healthcare field. A combination of strong fundamentals, supportive government policy, and, when properly navigated, clear regulatory frameworks creates an environment in which investors can build substantial and scalable healthcare platforms that serve the growing demand for quality medical care.
Anand Jayachandran and Aditya Prasad are partners at Cyril Amarchand Mangaldas
Cyril Amarchand Mangaldas
Peninsula Chambers Peninsula
Corporate Park
GK Marg, Lower Parel
Mumbai – 400 013, India
Contact details:
T: +91 22 6660 4455
